Crypto crackdown is getting started

There was much mirth online when the US justice department announced the arrest of crypto exchange Bitzlato's founder last week. Unpronounceable, unknown and unlike any of the far bigger fish (like Binance) getting headlines, Bitzlato looked like a small-fry. The fact that Bitcoin resumed its march past $21,000 seemed to confirm it.

But this ignores the bigger picture. In the first few weeks of 2023, watchdogs have done a lot. On January 3, a joint statement by US bank regulators warned the industry of crypto risks creeping into the banking system.

Then came a $100-million settlement with Coinbase Global over weak internal controls, a lawsuit against the Winklevoss twins' Gemini and broker Genesis for allegedly selling unregistered securities, and a $45 million settlement with lending platform Nexo (which has ceased US operations). Subpoenas are flying.


The wheels of justice turn slowly - the Gemini and Genesis complaint came too late for customers fighting to get back $900 million in trapped funds - but they're accelerating now. Regulators like the SEC rightly feel vindicated by the past year's events, which saw a widespread loss of faith in crypto fail to snowball into a wider economic crisis. The collapse of FTX demonstrated the industry's failings but also the benefits of a tough regulatory line on exchanges, such as when the SEC intervened behind the scenes in 2021 to ward Coinbase off launching its own crypto-lending product.